U.S. BUDGET CRISIS
Democrats and Republicans will have to deal with the fallout from the past week's bitter partisan budget brinkmanship, regardless of whether it drives the federal government to shut down. We will assess who lost most from the crisis, with a Reuters/IPSOS poll on Tuesday. We will also feature an in-depth look at the performance of Republican House Speaker John Boehner, who had to deal with hardline Tea Party-affiliated party members as well as more accommodating colleagues. No matter how much progress was made on the 2011 budget, the House is expected to vote and pass during the week the Republican proposal for a fiscal 2012 budget, which includes long-term cuts of trillions of dollars and a revamp of costly government healthcare programs.
LIBYA - A NEW QUAGMIRE?
The United States and its allies are trying to halt the crumbling of the armed rebellion in Libya while remaining within the restrictions of the U.N. mandate. That means sticking to air attacks and aid for stricken areas. Washington is skeptical of the viability of the rebellion. While there are no strong signs it is a Jihadist movement, there is great concern that without solid training, and probably arming, the rebels have no hope of prevailing against Libyan leader Muammar Gaddafi on their own. We will follow how Washington views the rebels, how the Obama administration envisages resolving the stalemate and whether it can accept Gaddafi remaining in power.
G20, IMF MEET AS OIL CASTS CLOUD ON RECOVERY
Top finance officials from the Group of 20 rich and emerging-market nations make their spring pilgrimage to Washington, meeting on the sidelines of semi-annual sessions of the International Monetary Fund and World Bank. Issues they will pick over range from soaring oil prices to how to correct trade imbalances. Sessions on Friday will consider how to set indicative guidelines to help nations react when excessive trade surpluses, inflation or other economic threats are apparent. To be sure, no one is looking for a definite answer on what such guidelines should look like, or when they need to come into effect. The talks will come against a backdrop of a revised IMF assessment of global growth prospects, due on Monday. It likely will express worry that surging energy prices are casting a cloud across an already hazy outlook for growth.
Leftist Ollanta Humala is forecast to win the first round of Peru's tight presidential election on Sunday, but it is not clear who he will face in a run-off expected on June 5 since he will not get 50 percent of the vote. Investors are worried that Humala will roll back reforms that have pulled Peru from the hyperinflation and guerrilla violence of two decades ago and made it one of the world's fastest-growing economies and a top global producer of copper, zinc, gold and silver. Poor Peruvians left out of the boom have rallied behind the former soldier turned populist leader. Right-winger Keiko Fujimori, former President Alberto Toledo and former Finance Minister Pedro Pablo Kuczynski are vying for second place on Sunday. Any one of them could unite opposition to stop Humala in the run-off.
Cuba's ruling Communist Party will hold its first congress in 14 years April 16-19 to approve economic reforms introduced by President Raul Castro. The changes will allow greater private initiative by Cuban citizens in the Soviet-style state-run economy. Cuba has not held a congress since 1997, perhaps to avoid public debate of the sorry state of the economy. The PCC is the only legal party in Cuba and its most powerful political body. The congress is expected to be largely a formality since Fidel Castro clarified last month that he had resigned as secretary general due to his illness. Raul is expected to be confirmed in the post. It could well mark the last party congress at which someone from the aging generation that led the 1959 revolution is in charge.
Stocks move into earnings mode next week with JP Morgan, Bank of America and Google among the first to report. Trading volume was low in Q1, so downside surprises may hit financial stocks, already sluggish of late. The U.S. Treasury sells $66 billion in three, 10 and 30-year debt even in the event of a government shutdown, and the recent rise in yields could drive demand. Foreign exchange trends remain in place, including a stronger euro and a weaker yen. That said, the euro is nearing $1.45 and worries about European debt could hit a market where momentum and relative strength indexes show the European currency is stretched.
U.S. ECONOMY AND HIGH ENERGY PRICES
Retail sales and inflation data could yield fresh clues on the impact of rising energy prices on the U.S. economy -- if a government shutdown does not delay their release. Sales probably rose for a ninth straight month in March, but gasoline station receipts are expected to account for the bulk of the gain. Rising gas and food costs are stealing spending from other sectors of the economy, which could slow growth. High commodity costs are expected to keep headline inflation elevated in March, but underlying price pressures are seen muted as economic slack limits the pricing power of businesses. Core CPI is seen rising 0.2 percent in March. Manufacturing data will likely confirm factories continue to power the recovery.